Tax Rules on Staff Christmas Gifts (2024)

Employers may wish to provide a gift to their staff. These are usually seasonal, such as a Christmas gift or Birthday present. Provided the cost is ‘trivial’ there will be no Tax or National Insurance payable.

A trivial benefit is a gift, which costs under £50 (this includes VAT and delivery costs). Examples would include a bottle of wine, flowers or a box of chocolates.

For further information on trivial benefits see EIM21865 onwards.

Christmas gifts to staff, which exceed £50 in value need to be declared to HMRC. This is typically reported on the employee’s P11D.

The £50 is not an allowance. As a result, a gift costing £60 would be taxable in full. The employee will be required to pay Tax and the employer will pay National Insurance.

Christmas presents or any gift which are received by the employee as cash will be taxable as earnings. This means it will be shown on the payslip and subject to Tax and National Insurance, where applicable.

Vouchers, which can be exchanged for cash are treated the same as cash received (as earnings per above). The employee will be taxed on the full value of the voucher.

Vouchers that can be exhanged for goods and services only are known as non-cash vouchers.

Non-cash vouchers which exceed £50 are taxable and must be reported on the employees P11D.

Non-cash vouchers which are under £50, will fall within the trivial benefits exemption (provided the necessary conditions are met).

Employees may receive a Christmas gift from a third party. This could include a bottle of Champagne as a thank you from a customer or supplier.

As long as the value of the gift does not exceed £250 it will not be taxable for the employee.

Gifts (non-promotional) to clients are not deductible against profits. They are classed as entertaining, which is not tax deductible. Examples would include alcohol, food hamper, tobacco, etc.

Promotional gifts to clients are classed as advertising, so these are tax deductible. For these gifts to qualify they must clearly advertise the company with personalised branding or logo. Examples would include branded stationery (pens, diary, etc), calendars, mouse mats, mugs, plus many more items.

In summary, as long as the event is available to all staff and costs less than £150 per head the party is tax free.

For a more detailed guide see our blog Tax on the Staff Christmas Party.